How do I deal with invoice overpayments received?

This article explains what to do if you receive more than the amount due on a customer invoice - for example, because the customer overpaid or the invoice amount was later reduced, or the customer accidentally paid the invoice twice.

Where you've received an overpayment from a customer compared to the amount due on their invoice, you'll need to resolve this in two steps. First, you'll need to reconcile the overpayment during bank matching. Then you'll need to issue a credit note, which you can either offset against a future invoice or use to refund the customer's overpayment. These two steps are outlined below.

Step 1: Reconciling the overpayment during bank matching

How you resolve this will depend on whether:

• you received the overpayment in a single payment - for example, an invoice for £35 where the customer paid £78.40;
• you received the overpayment in more than one payment - for example, an invoice for £35 where the customer paid twice, meaning you received £70 (2x payments of £35).

If you received the overpayment in a single payment

1. In the Bank Matching screen, match the income by clicking on the transaction in the left-hand table. In the pop-up that appears, select the 'Mixed Income' option from the drop-down menu.

   

2. To allocate the invoice payment, click the '+' in the 'Invoice Payments' section.

   

3. In the pop-up that appears, select the relevant invoice from the list and click 'Confirm'.

   

4. Then record the invoice overpayment in the 'Other Income' section, ensuring the overall total matches the income you received.

   

If you received the overpayment in more than one payment

1. In the Bank Matching screen, match the invoice by clicking on the transaction in the left-hand table. In the pop-up that appears, select the 'Invoice payment' option from the drop-down menu.

   

2. In the pop-up that appears, select the relevant invoice from the list and click 'Confirm'

   

3. Then in the Bank Matching screen, match the second payment (the duplicate) by clicking on the transaction in the left-hand table. In the pop-up that appears, select the 'Other income' option from the drop-down menu.

   

4. In the pop-up that appears, add a description, fund and category, and uncheck 'Remember this transaction'. The fund and category aren't important, though you might prefer to use the same fund and category that you used for the invoice.

Step 2: Creating a credit note

1. Then, in the Invoicing screen, click the 'By Customer' tab and the Customer drop-down to find the customer that the overpayment relates to, then click 'Create Credit Note'.

   

2. In the Create Credit Note screen, enter the same amount as the overpayment, and select the same category you used when bank matching the overpayment. For more details, see Creating a credit note.

   

You can then choose one of two options:

• either refund the customer - see Payment of credit note
• or leave the credit note and offset it later against a future invoice for this customer - see Allocating a credit note.

To better understand the Bank Reconciliation module, please view the module overview video here.